Company

Meaning
It is a company where capital is contributed by a large group of people, the shareholders, who have very restricted powers and have hardly any voice in the management of the business. According to Company Act, 1994, Company means a company formed and registered under this Act or any existing company.

Meaning
A company is a voluntary association of persons, recognized by law, having a distinctive name, a common seal, formed to carry on business for profit, with capital divisible into transferable shares, limited liability, a corporate body and perpetual succession. An analysis of this definition will bring out the distinctive characteristics of a company: Creature of law: A company is a creation of law because it is formed on the basis of Company Act 1994. It is sometimes called artificial person. So it has right to enter into contracts and own property. It can sue and can be sued.

1.

Characteristics
2. Distinct legal entity: Being a creature of law, a company is a legal entity, something distinct from the persons who are its members. A shareholder is not liable for the acts of the company. 3. Limited liability of members: The limited liability is another important feature of a company. A person acquires interest in the company through buying shares, and his liability is limited by the nominal amount of the shares held by him.

Characteristics
4. Perpetual succession: The incorporation process brings into being a corporate body distinct and separate from the members who constitute it. The right given to the shareholders to transfer their shares without in any manner affecting the position of the company gives the company continuity. The law creates the company and the law brings it to an end. Common Seal: The law requires every company to have a seal with its name engraved on it.

5.

Advantages
Limited Liability Skilled management team Transfer of ownership Greater capital base Stability Legal entity status

Disadvantages
Difficulty & expense of starting Lack of control Multiple taxation Government involvement Lack of secrecy Lack of personal interest Credit limitations

Distinction between a company and a Partnership firm

Registration: A company is formed by registration under the Companies Act. But a partnership need not be registered. Legal person: A company, being a legal entity, is a person distinct from its members. It acts in its own name. A partnership has no legal existence apart from the partners. The firm and the partners are one and the same. Limited liability: the liability of shareholders is invariably limited, wherein the partnership business it is unlimited.

Distinction between a company and a Partnership firm

Number of members: A private company can have a maximum number of 50 members and a public company has no limit. A partnership firm cannot have more than 20 partners. Transferability of shares: The shares in a company are transferable with the result that the shareholders can go on changing. A partner cannot transfer his share and interest in the partnership business without the consent of all the partners.

Distinction between a company and a Partnership firm

Continuity of existence: A company has perpetual succession. The death or insolvency of any or all the shareholders does not affect the life of the company, as it is distinct and separate from their lives. But the partnership comes to an end by the death or insolvency of partners. Capital requirements: A company rises its financial resources from the savings of a large number of people, usually in small amounts. A partnership has to depend upon the resources of the partners.

Distinction between a company and a Partnership firm

Management: the shareholders, who supply the capital cannot manage the affairs of the company, rather they entrust it to the Board of Directors. But in partnership, every partner is entitled to take part in the management of their firm. Compulsory audit: a company is required by law to have its accounts audited once a year by Chartered Accountant. No such obligation is placed upon a partnership firm.

Types of Companies
Private Limited Company: A private company is a company, which by its Articles Restricts the right to transfer its shares Limits the number of members to 50, excluding employee members and ex-employee members. Prohibits any invitation to the public for subscription to its shares or debentures

A private limited company must comply with all the three restrictions. If it fails to comply with any of these restrictions, it will be treated as a public company. The minimum number of members to form a private company is 2.

Types of Companies
Public Limited Company: It is a company in which membership is open to the general public under the provisions of its Articles. The minimum number required to form this company is 7 but there is no limit to the maximum number of members. It offers the share to the public by advertising such offer in a prospectus. A public company does not impose any of the restrictions necessary in the case of a private company, and any person competent to contract can become its members. It can commence business only after it receives a Certificate to Commence Business from the registrar.

Private Ltd Co. VS Public Ltd Co

Minimum number of members : Minimum number of members required to form a private company is 2, whereas a Public Company requires at least 7 members. Maximum number of members : Maximum number of members in a Private Company is restricted to 50, there is no restriction of maximum number of members in a Public Company.

Transferability of shares : There is complete restriction on the transferability of the shares of a Private Company through its Articles of Association , whereas there is no restriction on the transferability of the shares of a Public company Issue of Prospectus : A Private Company is prohibited from inviting the public for subscription of its shares, i.e. a Private Company cannot issue Prospectus, whereas a Public Company is free to invite public for subscription i.e., a Public Company can issue a Prospectus

Number of Directors : A Private Company may have 2 directors to manage the affairs of the company, whereas a Public Company must have atleast 3 directors.

Consent of the directors : There is no need to give the consent by the directors of a Private Company, whereas the Directors of a Public Company must have file with the Registrar a consent to act as Director of the company. Qualification shares : The Directors of a Private Company need not sign an undertaking to acquire the qualification shares, whereas the Directors of a Public Company are required to sign an undertaking to acquire the qualification shares of the public Company . Commencement of Business : A Private Company can commence its business immediately after its incorporation, whereas a Private Company cannot start its business until a Certificate to commencement of business is issued to it.

Shares Warrants : A Private Company cannot issue Share Warrants against its fully paid shares, Whereas a Private Company can issue Share Warrants against its fully paid up shares. Further issue of shares : A Private Company need not offer the further issue of shares to its existing share holders, whereas a Public Company has to offer the further issue of shares to its existing share holders as right shares. Further issue of shares can only be offer to the general public with the approval of the existing share holders in the general meeting of the share holders only. Statutory meeting : A Private Company has no obligation to call the Statutory Meeting of the member, whereas of Public Company must call its statutory Meeting and file Statutory Report with the Register of Companies.